Rumors swirl around Verizon acquisition of Netflix

If LTE is set to usher in the age of mobile video in 2012, Verizon might be preparing to dive right in with an acquisition of DVD and streaming video provider Netflix. At least, that's the gist of the rumors being reported recently.

According to Bloomberg, Verizon is seriously considering a bid to acquire Netflix. The Bloomberg article cited Porter Bibb, managing partner at Mediatech Capital, who said that Verizon could buy Netflix for an estimated $4.6 billion.

Vince Vittore, principal analyst with Yankee Group, said in a report released today that either an acquisition, or even a strong marketing partnership with Netflix, would make strategic sense as Verizon slows down the expansion of its FiOS footprint.

“While Verizon rapidly has become a top 10 provider of subscription TV services in the U.S., with just over 4 million subscribers, the market has become a zero-sum game, and finding revenue outside its traditional footprint should be a key strategic initiative," Vittore wrote.

Whether Verizon proceeds with such a purchase of that size, even as it dumps cash into finishing up its LTE network, remains to be seen. Industry analyst Jeff Kagan suggests it might be a little too expensive, even for a behemoth like Verizon.

"Verizon never wants to overpay for anything," Kagan said in an email to Wireless Week. "Remember when they acquired long-distance company WorldCom several years back? Verizon said all along they had no interest in acquiring the company until the price got low enough, and suddenly they did have an interest."

Kagan suggests the same thing may happen here with Netflix. "Perhaps they are just waiting for Netflix’s price to keep dropping until they suddenly grab it."

Both Verizon and Netflix have declined to comment on the matter.

Shares of Netflix rose 6 percent Monday on Bloomberg's report to just under $77 per share. Since then, shares have dropped back to pre-rumor prices and were trading at $70 in early morning trading today.